View Full December PDF Issue - Utility Contractor Online

groundbreaking news
No Loans = Less Jobs
Ongoing Credit Crunch Increases Stalled Projects
and Lingering Unemployment
One-in-five stalled projects are directly
resulting from financing problems,
but did you know that more than 25
percent of projects reported as stalled
could qualify for LEED, Green Globes or
other green certification status?
The American Institute of Architects (AIA) is an excellent organization,
and like NUCA, it’s a torchbearer for its industry (in this case
professional architects). AIA is always releasing comprehensive reports
on the construction industry and its latest one — Stalled Construction
Projects and Financing Problems — caught our eye. The
report concludes that the major obstacle holding back job creation
in the United States is the persistent lack of construction financing,
despite record low interest rates.
“This report should lay to rest any doubt about what is a
key source for holding back job creation,” said Kermit Baker,
Chief Economist of the AIA.
“It is the lack of financing
especially to the
design and construction
sector,
which accounts
for $1 in $9 of
U.S. Gross Domestic
Product.”
Relying on data compiled by McGraw-Hill Construction
and Reed Construction Data, the report found that:
1. The share of projects stalled due to financing problems
through August 2011 has almost doubled since 2008.
2. One-in-five stalled projects are directly resulting from financing
problems.
3. Financing problems account for a higher share of stalled
projects in the education and multi-family sector.
4. More than 25 percent of projects reported as stalled due to
the credit crunch could qualify for LEED, Green Globes or
other green certification status.
5. Financing issues are less of a factor holding back projects in the
manufacturing, private health care and retail environments.
“Whatever the reason — be it over-regulation, the threat of a double-dip
recession or the reluctance to have too many loans on the
books — lenders are just not lending to a major job-producing sector
of the American economy,” Baker noted. “Until more credit is
extended, the potential of non-residential construction to promote
greater levels of economic growth will not be realized.”
The construction industry is one of the most volatile sectors in the
U.S. economy and, as such, benefits greatly from economic expansions
and suffers greatly in economic downturns. The most recent
economic cycle has been particularly devastating for the construction
industry. Since the end of 2008, construction spending in the
United States has declined by more than a quarter, or by almost
$300 billion, with the loss in this sector alone accounting for a 2 percent
decline in the size of the U.S. economy. But even this significant
decline underestimates the total impact of this loss on the economy.
Want to learn more? Visit AIA online at www.aia.org/index.htm.
8 Utility Contractor | December 2011